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Cook Inlet Oil and Gas Players Meet In Soldotna

Shaylon Cochran

Thursday, September 27, 2012

Executives from several energy companies and representatives of the Alaska Oil and Gas Association met Tuesday in Soldotna to give a presentation to local business leaders on the state of the industry in Cook Inlet.

Of all the things unique to Cook Inlet, the one that might matter most to energy producers is the tax structure for exploration and production.

“Policy makers a long time ago recognized that Cook Inlet has potential, but there’s challenging economics here,” said Kara Moriarty, Executive Director of the Alaska Oil and Gas Association. ”There’s virtually no production tax here. I think that has proven fruitful as you can see some rejuvenation in Cook Inlet. If you had high taxes here, it would never survive,” she said.

For John Hendrix, general manager for Alaska operations at Apache Corp, it’s the permitting process that sets the tone for any economic windfall.

“Permits equal pace which equals progress which equals production,” Hendrix told members of the Soldotna and Kenai Chambers of Commerce. ”Until Alaska diversifies its income stream off of oil, we’re dependent upon growing production to feed this state and to create jobs,” he said.

McKibben Jackinsky of the Homer News reported Wednesday that Apache’s seismic work on shore near Ninilchik has been delayed as they wait for approval on federal permits from the US Army Corps of Engineers. The company also needs to submit an environmental assessment for that project, part of which is located within the Kenai National Wildlife Refuge. Despite such setbacks, Apache is moving ahead with other projects in the Inlet. An off-shore rig arrived near Tyonek last week, and Hendrix says that well is scheduled to begin producing next spring.

Cook Inlet’s recent resurgence has come on the shoulders of several new players, like Apache, Buccaneer and Hilcorp, who specialize in developing sites that, for whatever reason, were never fully developed in the past. John Barnes is the Senior Vice President for Exploration and Production for Hilcorp, a company that is now working to develop assets it purchased from Chevron earlier this year. He said that new players in the game will change the culture of energy development in the Inlet.

“We found ourselves having to find a culture where we really try to drive performance,” Barnes said. ”Make things happen, make it happen quickly.”

Moriarty said that because so much in regards to production is out of the hands of the energy companies, it’s up to the state to promote exploration and production.

“We can’t control geology, we can’t control location, we can’t control our high-cost environment, but what we can control our taxation and our permitting system,” she said.

One company noticeably absent from Tuesday’s meeting was Buccaneer Energy. They have projects on shore in Kenai,and have been working to develop off shore projects there. Their jack-up rig, which has been sitting in Kachemak Bay for nearly six weeks, is still undergoing repairs and inspections before heading north.

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